Moody's Downgrades BofA, Wells Fargo, Citigroup On Fears U.S. Wouldn't Aid Banks [UPDATE]

Moody's Corp on Wednesday cut the debt ratings of Bank of America Corp, Wells Fargo & Co and Citigroup Inc, three of the largest U.S. banks, on worries the government would be less likely to support a large lender if it got into trouble.

The government is "more likely now than during the financial crisis to allow a large bank to fail should it become financially troubled, as the risks of contagion become less acute," the ratings agency said.

The action concludes a three month review that began in June when the ratings agency said the banks faced a potential downgrade.

Moody's downgraded Bank of America's long-term senior debt rating to "Baa1" from "A2" and its short-term debt rating to "Prime 2" from "Prime 1."

Moody's said the long-term outlook on the bank's senior ratings remains negative.

Bank of America shares were down 3 percent at $6.69 after the announcement. Citigroup shares declined 0.1 percent at $26.89 and Wells Fargo shares were up 1 percent at $24.92.

(Reporting by Joe Rauch; editing by Gunna Dickson and Andre Grenon)

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[Kia Kaha]

12:26 AM on 09/26/2011

Who downgrades Moody's?

[Dartagnon Puissant]

02:01 PM on 09/23/2011

Perhaps I missed something in the news but when BofA gave back the $60 billion borrowed from the govt it was reported that they had reserves of about $300 billion. Not a bad nest egg. So, did I misread the report or does Moody's think that $300 billion is too small a nest egg for a national bank?
They really seem to be hugging their money tightly right now. I applied for a loan mod but they turned me down because I did not make enough money, according to the Obama plan, they claimed. In order to drop my loan from $1554 / month to $900/month they said that I would need to be making $1,000 more per month. So, because I'm POOR they have to charge me MORE on my loan, but if I were making MORE they could charge me less. What kind of BS is this world coming to anyway? What irks me the most is that I contacted the County and asked them to lower my home value from $282,000 to $125,000. They did and my taxes were cut in half. I then shopped insurance companies until I was able to save about $200/year. NOW, all the bank would need to do would be to drop the interest rate from 6.5% to about 3% and my payments, WITH PT/I, would be about $900. So what if I would still be paying them almost all of my SSDi income ... Banks suck.

[had410]

05:23 PM on 09/23/2011

just read the last two words, and decided to fav ya!

[craneman]

11:32 AM on 09/23/2011

the original bail-out should not have happened in the first place--

[MalekJordan]

10:45 AM on 09/23/2011

I wonder how these guys feel now about floating the risk of mortgages, etc? Sure did get us all in a lot of trouble. Now they're FINALLY paying the price. Sadly, in order for us to remain in good standing and hope to turn around our debt rating, we have to help them out again. Thanks Tea Party! Next time, take a finance class!!!

[norkas]

09:00 AM on 09/23/2011

BOA and other banks still have so much debt from the real estate meltdown that they have not disclosed to the press that when the truth comes out it will send shock waves to the global market.

They are slowly selling off very important properties to their friends often for far less they could make in the open market. These exclusive foreclosed properties are not being disclosed to the general public and many of them are being sold in backdoor deals that harms the stockholders and Americans who may have to bail them out.

I am speaking about over a trillion dollar in further loses these banks will need to make.

I wish someone would investigate these deals that are bad very quietly selling off banks foreclosed properties at discounts that are well below market value even in this sick economy.

Who makes money on these back door deals? I have been told by very good sources the bankers are well taken care off who arrange these deals.

[Prometeo]

07:20 PM on 09/22/2011

I wonder if this means the end of Warren Buffet´s luck streak. He invested on this bank and I don´t think he saw this coming. Looks like the oracle is losing his sight.

[muck-raker]

07:49 PM on 09/22/2011

excerpt: Goldman argued they didn't need government supervisio­­n for simple reason: Rooting out fraud was in their own self-inter­­est. In event of financial wrongdoing­­, they would do their civic duty and protect markets. well before many of other players on Wall Street realized what was going on, top dogs at Goldman — — started to fear they were sitting on time bomb of billions in toxic assets. Yet instead of sounding alarm, first thing Goldman did was tell no one. second thing was figure out way to make money on knowledge by screwing its own clients. So not only did Goldman throw a full-blown "bite me" on its own self-right­­eous horsechit about "internal risk management­­," it instantly sped way beyond inaction straight into craven manipulati­­on.

. Spitzer, as NY attorney general. "Their whole political argument for decade was 'Leave us alone, trust us to regulate ourselves.­­' They not only abdicated responsibi­­lity, they affirmativ­­ely traded against entire market. other words, the bank needed to find suckers to buy much of risky inventory as possible. Goldman was like car dealership that realized it had whole lot full of cars with faulty brakes. Instead of announcing recall, it surged ahead with a two-fold plan to make fortune: first, by dumping dangerous products on other people, and second, by taking out life insurance against fools who bought the deadly cars.
more great short read: http://www­­.rollings­t­one.com/­po­litics/­new­s/the-­peop­le-vs­-gold­man-­sachs-­201­10511?p­ag­e=3””
Sha

[Brian Childers]

04:28 PM on 09/22/2011

^^

[Brian Childers]

04:28 PM on 09/22/2011

...And that is how it is!

[Jesse P. Steinberg]

03:59 PM on 09/22/2011

If they rescue the big banks, you will collapse the market. If government or banks can't solve their own problems, there will be a collapse anyways.

Either way, mostly everyone will lose.

[madcityy]

01:54 PM on 09/22/2011

CLOISE THIS BANK AND ALLL OTHERS BAILED OUT....................

[CaptainRenault]

01:52 PM on 09/22/2011

Finally, the karma is catching up to their misdeeds.

^ ^

[donaldaq63]

06:51 PM on 09/22/2011

The problem is..the people at the top will not suffer as they are wealthy beyond a reasonable amount. The average workers will bear the brunt of suffering as they will be unemployed and have to face the horrible consequences of prolonged unemployment and the fear of losing all they own. If these banks do collapse the top officers need to be jailed and have all their assets seized so they have NOTHING left. Said assets can then go to fund unemployment benefits, retraining and job relocation for the general workers.

[asiclilpup]

01:42 PM on 09/22/2011

Good news and bad news. The good news is the banks deserve it, and the bad is now the banksters will come up with other ways of hiway robbery to look good in Moody's eyes. Ahhh that greatgod of profit at the expense of everyday people.

[vippy]

01:24 PM on 09/22/2011

Don't forget about the derivatives, yes, them! You know the term “Ponzi scheme” because that’s the one they want you to know, or at least, have allowed you to remember in history. What if I told you there was a man who stole much more then Ponzi did during the same time, but somehow you never heard his name. A man who was the main reason new laws were put into effect to prevent another Wall Street crash in the US after the Great Depression. Laws that were successful up until Ronald Reagan began dismantling them. That mans name was Ivar Kreuger and the reason you don’t know his name is because his games are still in play. His scheme, his invention, is called the derivatives market. There’s an excellent book called “The Match King” about his life.

[CaptainRenault]

01:47 PM on 09/22/2011

Good point.

Fanned, faved and badged.

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[AIRSCRIBE]

01:12 PM on 09/22/2011

The downgrade I'm waiting for is to S&P...downgraded to out-of-business...

[berrycuda]

12:15 PM on 09/22/2011

If the large banks would drop thier credit card interest rates, they and the economy would pick up instantly...

Make the rates fair, 3 to 5 percent should be more the enoungh to make money and stimulate the economy.

[CaptainRenault]

01:50 PM on 09/22/2011

Maybe not quite that low, but certainly there is a fair room for a significant reduction. Banks are gouging on these rates. Offhand, I would say a range of about 9% to 14.5%, unless you have really bad credit. Even so, I think that the top rate should be about 21%.

^ ^